--Since March this year, there has been a spate of bank failures in the US. IT and other start-ups have been heavily affected by this.
Since 2023, a number of US financial institutions have failed: in March, Silicon Valley Bank (SVB), which deals with IT start-ups; Silvergate Bank and Signature Bank, whose main customers are crypto-asset-related companies; and in May, California-based First Republic Bank ( FRC), which is based in California.
The financial turmoil has also spread to Europe, with Switzerland's Credit Suisse (CS) also hit by the crisis in March. The country's central bank announced a 50 billion franc injection into CS, and the situation was calmed down when the country's top bank, UBS Bank, took over CS.
SVB and Signature Bank were the biggest failures, and FRC was the second largest US bank failure in history, surpassing SVB. Subsequently, the US financial authorities announced that SVB's deposits would be fully protected in order to limit the impact on the financial system as a whole, while for FRC, it was announced that its deposits and assets would be acquired by JP Morgan Chase, a major bank. A total of 84 branches in eight states in the US have resumed operations as the bank's branches.
The series of failures was triggered by repeated policy rate hikes by the Federal Reserve System (FRB), the US central bank. The country's bold monetary easing after the Corona disaster triggered inflation, with the consumer price index recording more than 7% for about a year from December 2021 onwards. This had a major impact on people's lives.
In order to curb excessive investment and consumption, interest rates were raised a total of nine times between March 2010 and May this year, which led to higher interest rates on government bonds and further withdrawals of funds by customers. The three banks that failed in March had IT start-ups and crypto-asset-related companies as their main customers.
After the Corona disaster, the easing of monetary policy allowed funds to flow into these growth sectors, but higher interest rates not only made it more difficult for IT start-ups to borrow, but also increased the risk of interest-bearing debt repayments.
Share prices also slumped, making it less easy to raise funds from the market through IPOs (initial public offerings), for example, as SVBs were unable to withstand bad debts and cash withdrawals by cash-strapped clients.
With regard to crypto assets, it is obvious that if interest rates on US Treasuries rise as a result of higher interest rates, many investors will turn their money towards safer alternatives. The increase in the number of people selling crypto-assets has led to a downturn in the performance of the companies operating the exchanges, which in turn has affected the two banks that finance them.
Above all, the current situation is a major headwind for start-ups. Until now, they have been able to maintain their growth by taking out loans on the back of low interest rates, but their fragile financial base is unlikely to hold up under high interest rates.
On the other hand, the current situation is also negative for VCs who have invested in start-ups. They, too, have relied on loans from financial institutions to fund their investments, and high interest rates and financial instability are discouraging them from investing.
The US has led the world economy in IT, including producing GAFAM, but what will happen now? These companies have also announced layoffs and the future is in doubt. It is sincerely hoped that the financial crisis originating in the US will not spread further around the world.
--The situation has changed drastically, with the new coronas being moved to category 5 infectious diseases. As a result, inbound travel is returning to Japan.
The corona disaster has begun to calm down and the Japanese Government has eased entry restrictions. As a result, inbound flows are recovering.
To begin with, the Japanese Government began actively implementing measures to become a tourism-oriented country in 2014, the year after the 2020 Tokyo Olympics were decided, and by 2019 the annual number of visitors will exceed 30 million. The increase in the number of visitors to Japan boosted the performance of inbound-related companies, such as airlines, accommodation, apparel and retail, and increased their share prices.
However, as we all know, the pandemic spread and inbound tourism went out of fashion, and the performance of related companies plummeted. It is still fresh in our minds that the share price also slumped.
The situation remained difficult after that, but as mentioned earlier, the number of visitors to Japan improved significantly with the easing of entry restrictions: in 2022, the number of visitors returned to 3.83 million, and in 2023, approximately 1.49 million visited Japan in January, 1.47 million in February and 1.81 million in March.
Then, the future global economic recovery and the resulting increase in inbound travel will be an undeniably positive factor for the hard-hit business sectors.
For example, in the case of JAL (9201), the share price briefly fell from the 3,000 yen level to below 2,000 yen in the wake of Corona, but has recently recovered to the 2,700 yen level; ANA (9202) has formed a similar price trend, with the share price, which was once in the low 2,000 yen range, exceeding 3,000 yen by mid-May.
From the perspective of a global economic recovery, energy-related companies such as construction machinery and oil and coal are likely to come back to life as construction demand recovers in China and Asia. A positive cycle will also turn, with more foreigners visiting Japan as the overseas economy improves.
Focusing on inbound consumption also reveals other sectors and industries that are likely to grow. For example, department stores. In Japan, this is one of the declining industries, with a string of closures of regional offices, but it boasts strong popularity among visitors to Japan, helped by the depreciation of the yen.
As if to prove this, department stores' stocks such as J. Front Retailing (3086), which operates Daimaru Matsuzakaya, and Takashimaya (8233) reached new highs for the year in April. Theme park-related stocks such as Oriental Land (4661) and railway stocks that carry inbound tourists are also doing well.
Drugstores and electronics retailers, which are frequented by visitors to Japan, are also expected to grow. In terms of post-Corona, leisure demand from Japanese as well as inbound travelers is also set to recover.
This has boosted not only regular car rentals but also campervan rentals against the backdrop of the popularity of camping in recent years. The celebrity Akiko Matsumoto started this as a sideline business, which also attracted a lot of attention.
As the Japanese and global economies brighten, unexpected businesses may continue to be in the limelight.
--Japan is pushing forward with its super-aging society. As a result, senior-related businesses are attracting attention, one of which is ‘age-tech’.
The proportion of the population aged 65 and over in the total population (ageing rate) is 28.4% (2019), making Japan the world's top ageing society. In recent years, it has often been taken up as a social issue, for example due to rising social security costs.
On the other hand, some businesses are growing because of the ageing society. Medical and nursing care is just such a case, and associated healthcare-related businesses, travel and gourmet food targeting active seniors are also popular.
Against this backdrop, the term ‘age tech’ is attracting attention. This is a term coined by combining the words ‘age’ and ‘technology’, and refers to technology that supports the health of seniors and solves inconveniences in their daily lives.
For example, operating household appliances by voice is extremely convenient for elderly people who cannot move around as much as they would like. It may be reassuring to be able to see what is going on at the front door from a smartphone or other device. The widespread use of such technology will improve quality of life, and the shortage of caregivers will also improve somewhat.
There are benefits for both caregivers and care receivers, and it is certain to become an indispensable business in Japan in the future.
--Subscription services are highly popular for music and video distribution. Meanwhile, in the world of PR, there is a move towards a ‘return to analogue’.
Subscription services allow the use of a specific product or service for a fixed period of time and at a fixed price. They have been introduced in music, video distribution and, more recently, food and beverage, and are highly popular.
In the case of music, for example, subscribers can listen to music as much as they want, and some services allow them to enjoy podcasts and other services. It also seems to provide an opportunity to learn about music you wouldn't normally listen to. On the other hand, there are disadvantages, such as monthly fees and the inability to listen to music that has not yet been banned by the subscriber.
Subscribing is thriving now, but what about the future? At first, people are willing to use them because they are good value for money, but it is undeniable that over time they may get used to them and feel that they are taken for granted.
Instead, conventional sales promotions, which sell at a fixed price and occasionally add services, are more likely to motivate users to buy, and this kind of ‘return to analogue’ approach is beginning to be adopted mainly in the field of PR. There are also a limited number of businesses for which subscriptions are a good match.
Music and video are convenient, but what about cars, furniture and household appliances? They are expensive to actually purchase, but even subscriptions have their own costs. In the case of books and comics, the desire to own the actual product is also apparent.
In any case, the human mindset is that ‘convenience gets boring’. Although it is now spreading to all areas, there is a possibility that it will be phased out in the future. Consumer preferences can change at any time, and subscriptions are not necessarily a business that will be safe for the rest of their lives.
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